Charles Jillings, CEO of Utilico, energized by strong economic momentum across Latin America. Watch the video here.
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Positive Points: The company announced the proposed payment of a special dividend (30 pence per share). The company regularly reviews the structure and efficiency of its balance sheet. Management noted that "over the past six years, we have consistently increased our investment in organic growth drivers and have invested some £600 million in bolt-on acquisitions to add complementary technologies and extend our geographic reach in high-growth markets. Although this investment remains our priority and we continue to actively evaluate potential acquisitions, we have not found opportunities that meet our acquisition and return criteria over the past 18 months. As a result, we have accumulated surplus cash on the balance sheet." The board highlighted that "the overall performance benefited from our strength and breadth as a diversified engineering company, with our portfolio of leading-edge, technology-driven businesses which serve a wide range of end markets and geographies." Revenue growth in Smiths Detection, John Crane and Flex-Tek offset weaknesses in Smiths Medical and Smiths Interconnect. Accompanying management outlook comments noted that "we remain well placed to benefit from growth in energy demand, the need for new fuel-efficient aircraft, increased US residential construction and the ever present need for improved security in an uncertain world." The group confirmed in late May that it had received an approach for its Medical division. However, a suitable price for both parties could not be agreed. Speculation regarding potential divisional sales persists. Such disposals might make the remaining company more attractive as a takeover target. Emerging market revenues rose by 14% and now represent 16% of total group revenues. Both China and the Rest of the World grew revenues by 6.8% and 16.4%, and now account for 3.1% and 19.5% of total group revenues respectively. A progressive dividend policy continues to be pursued. The total dividend over the full year was increased by 4%. Group net debt at 31 July 2013 was £744 million, down from £791 million at 31 July 2012. Founded in 1851 by Samuel Smith as a clock and watch business, today Smiths Group is organised into 5 separate divisions (Smiths Detection, Smiths Medical, John Crane, Smiths Interconnect and Flex-Tek) with operations spanning 50 countries around the globe.
Negative Points: Previously announced difficulties at the company's Detection business dragged on profitability. Operating profit declined by 16% to £58 million. The current order book is slightly behind the same time last year. Headline operating profit declined by 7% at the company's Medical division. Profit margins were hit by the accelerated investment in a range of growth initiatives, including sales capabilities in emerging markets and new product development. The impact of a US medical device tax and pricing pressure in many markets also impacted. Accompanying management comments noted that "we continue to be cautious about sectors such as defence and healthcare which are subject to government funding constraints." Foreign exchange movements can drag on financial performance.
Financial Highlights: Group headline revenue grew by 2% to £3.1 billion Adjusted or headline operating profit rose by 1% to £560 million Total dividend over the full year increased by 4% Payment of a special dividend (30 pence per share) to be made
Full year results: The announcement provided investors with a positive surprise. Management announced the unexpected payment of a 30 pence per share special dividend payment, noting that "the group continues to benefit from high cash conversion and a balance sheet that has been considerably strengthened in recent years." The share price rose by over 4% in opening trading. The CEO went on to highlight that "we continued to invest to rebalance revenue and profit streams away from government to commercial customers, and also raise our exposure to faster growing markets." Emerging market revenue rose by 14% and now represents 16% of total group revenues. While the US remains comfortably the company's biggest market, generating around 45% of 2013 revenues, both China and the Rest of the World grew revenues by 6.8% and 16.4%, and now account for 3.1% and 19.5% of the total respectively. Accompanying management outlook comments noted that "our priority is to drive operational improvements and efficiencies across our businesses that will fund additional investment in high-growth markets and new product development to accelerate medium-term revenue growth. We see significant opportunities to generate value for shareholders although we continue to be cautious about sectors such as defence and healthcare which are subject to government funding constraints.
Special div. 30p plus final of 27p and ex-div date of 23 Oct.
Interesting!
Smiths Group: Morgan Stanley revises target price from 1125p to 1281p maintaining an equal-weight rating.
Smiths Group: JP Morgan lowers target price from 1330p to 1315p, while an overweight rating is kept.
Smiths Group: Jefferies reduces target price from 1600p to 1400p and reiterates its buy recommendation.
What has happened at Invensys makes the break-up of Smiths more likely and that justifies buying the shares as a short-term speculation. Beyond that, there is lots of merit in the group that's not reflected in a share rating of 13 times forecast underlying earnings for the current year.
Of course, cuts to US government spending pose a threat, especially to military clients of both the detection division and Interconnect, which supplies electronic components. The US public sector may contribute a fifth of Smiths' sales; include government customers elsewhere and it's more than a third. Still, it was over 50 per cent five years ago and, according to Deutsche Bank, a fresh set of financial targets and clarity on US government spending could push the share price way past 1,300p. Expect Smiths' underlying operating profit margin to stay above 18 per cent this year, too, and keep rising thereafter. Big cost savings will help - £70m is in the bag already and detection will find another £40m by 2014. And price increases at the medical division should offset a 2.3 per cent tax on US medical devices introduced on 1 January. Moreover, US airports will soon need to upgrade security screening kit installed in a hurry after 9/11. True, that may be a couple of years out, but it gives Smiths time to get US approvals and test its new high-speed explosive detection system elsewhere. When the tenders are put out, Smiths should be in pole position.
Away from the talk of break-up, there is a strong investment case for Smiths anyway."I'd sooner bat off the fundamentals than the easy-come, easy-go furore that's accompanied the Invensys deal," says Mr Morris. And it's easy to see why. Management kept forecasts for 2012-13 unchanged after underlying revenue grew in all divisions during the three months to October, and underlying operating profit rose everywhere except medical, held back by higher sales and marketing spend. Aerospace and US housing work mean Flex-Tek, which supplies hoses, should continue to do well and orders for x-ray machines and other kit are flooding in at the detection division.
Smiths Group (SMIN) looks ripe for a break-up. We've said so before, but the recession and a big deficit in its pension funds kept things quiet. Now that Invensys and others have shown these needn't be an obstacle, interest is swirling again. The fundamentals are attractive, too. So, even after a good run, shares in Smiths are worth buying. Chief executive Philip Bowman admits Smiths is an eclectic mix. Yes, each division is profitable and diverse enough to lessen the chances of a share price shock, but, be in no doubt, Mr Bowman will sell at the right price. Pension issues scuppered the £2.45bn sale of the medical division two years ago, but, as Invensys showed last month, a pension-fund deficit no longer acts as a 'poison pill' to deter bidders. By the end of July, low interest rates had tripled Smiths' pension deficit to £620m. But analysts at Deutsche Bank reckon Smiths may only have to stick an extra £370m into the pension fund to secure a sale of the medical division - hardly a deal-breaker. What's more, a rise in bond yields of a percentage point or so could wipe out the deficit, according to Nomura. A government review of pension fund accounting methods might even do the job. Granted, selling the medical division, or the other big profit generator, John Crane, which supplies mechanical seals and bearings to oil companies, would still take some work. But Smiths could easily offload a smaller division. "Flex-Tek is an absolute gem and could be sold without ruffling any feathers," says Sandy Morris, an analyst at broker Jefferies.
fact........ Smiths Group (SMIN) Share price: 1,176p Long-term break-up target with shares trading below sum-of-parts value Enough divisions trading well to meet City forecasts
Smiths Group: Deutsche Bank raises target price from 1150p to 1335p and upgrades to buy.
Donald Brydon, the Chairman of advanced technology giant Smiths Group has announced his intention to retire from the board next year. The revelation came at the company's annual general meeting on Tuesday, in which the firm reported that its underlying revenue has grown across all divisions in the three months ended November 3rd, with full-year expectations remaining in line with previous guidance. Brydon, who has been in his position as Chairman since 2004, said in a statement: "I have today informed the board of my intention to retire in 2013 and have asked that the board, led by the Senior Independent Director, undertakes a process to determine the selection and appointment of my successor." He said: "I will, of course, remain fully engaged until that process is completed." The shares held on to gains after the announcement, trading 0.87% higher at 1,048p before the close.
Positive Points: Underlying revenues grew across all divisions. Management expectations for the year remain in line with guidance given at the full year results. John Crane delivered sustained underlying revenue growth in the period. The division, which makes mechanical seals for the oil and gas industry, enjoyed ongoing demand for its first-fit original equipment and aftermarket services. Growth in Emerging Market revenues remains a focus. The board noted that its Flex-Tek division had started the year well. Underlying revenue growth was driven by a strong performance in aerospace and US residential construction. A progressive dividend policy continues to be pursued. As an industrial conglomerate, speculation that the company could eventually be taken over/broken-up continues to linger.
Negative Points: Whilst underlying revenues grew across all divisions, underlying headline operating profit did not expand at Smiths Medical. Substantially increased investment in sales and marketing in higher growth markets impacted. At Smiths Medical, looking to the balance of the year, the introduction of a medical device tax in the US in January is expected to constrain growth and margins. The impact of foreign exchange translation represented a slight headwind to the level of profit growth. Pressures on government spending are expected to continue; conditions are likely to continue to constrain parts of business with government-funded customers. Via John Crane, the group is exposed to numerous lawsuits in the US where damages arising from products containing asbestos are pending.
First quarter update: Trading at Smiths Group reassures. The statement broadly reassured investors, with management's expectations for the year remaining in line with guidance given back at the full year results. The board highlighted "underlying revenue growth across all divisions." Demand for its first-fit original equipment and aftermarket services helped drive performance at its John Crane business, whilst its Detection division continued to build on its performance improvement programme, delivering cost savings and completing first shipments from its new manufacturing facility in Malaysia. Less positively, although as anticipated, headline operating profit at its Medical division was lower, reflecting the annualised effect of its increased investment in sales and marketing in Emerging Markets. In all, despite broader concerns over the health of the global economy, the company continues to make progress,
Company overview Smiths Group is a leading British engineering company involved in wide-ranging speciality engineering activities. It is based in London, listed on the London Stock Exchange, and a constituent of the FTSE 100 Index. Smiths Group has five divisions - Smiths Detection, Smiths Medical, John Crane, Smiths Interconnect and Flex-Tek. They are focused on threat & contraband detection, medical devices, energy, communications and engineered components markets worldwide. The group’s customers range from governments and their agencies, to hospitals, petrochemical companies and equipment manufacturers and service providers in various sectors around the world.
big trade just gone thro jange......
Smiths Group: Societe Generale initiates coverage with sell rating and 940p target.
Smiths Group Buy 16-Oct-12 £94,291.61 Peter Turner 8,996 @ 1,048.15p
Technology group Smiths Group said its bond offering, announced on October 5th, has now closed. The company raised $400m through the issue of dollar-denominated notes with a 10-year maturity and a fixed coupon of 3.625%. Smiths Group will use the net proceeds from the notes for general corporate purposes and to repay certain existing indebtedness of the company.
Smiths Group is to launch a 400m dollar-denominated bond offering, saying that the funds will be used for general corporate funding purposes and to repay certain existing debt. The notes, with a coupon of 3.625%, mature in October 2022 and the offer is expected to close on October 12th 2012. They will be guaranteed by Smiths Group International Holdings and rank as unsecured debt. At the last set of results for the year ended July 31st, this FTSE 100 constituent had net debt of £791m and paid out £63m on that debt net of interest earned on cash deposits. Consensus estimates for 2013 are for a pre-tax profit of £494.79m on turnover of £3.1bn. This will place the stock on a forward price-to-earnings ratio of 10.8, offering a prospective yield of 3.8%